JIBAR to ZARONIA: Top questions answered

While South African Reserve bank (SARB) MPG working group discussions are still ongoing and proposed transition guidance is still being prepared, we can provide some general answers to frequently asked questions regarding ZARONIA adoption. 

Also included, for your background information, is our note compiled in March 2025, which provides context to ZARONIA, together with its expected impact and implementation. Read it here.

How will instruments be traded in future – and will these be linked to JIBAR or ZARONIA? 

JIBAR-linked floating rate securities are still being issued and are currently available to the market. 

ZARONIA-linked floating rate securities have recently become available to the market and issuance is slowly ramping up as market players start to approve adoption of this reference rate when issuing new securities.  

The market is expected to stop issuing JIBAR-linked securities at a date to be confirmed (current expectation is 31/03/2026). The SARB will action this by issuing a directive that no new contracts referencing JIBAR are to be written from this date onwards.  

Once this date is reached, there will be a shift from JIBAR-linked exposures to ZARONIA-linked exposures, with the expectation that JIBAR-linked exposures will be phased out entirely, either via explicit sales of JIBAR-linked positions and purchase of ZARONIA-linked exposures or via a transition process whereby the existing JIBAR-linked contracts switch over to ZARONIA-linked reference rates using fallback methodology wording (which is to be provided by the SARB Market Practitioners Group (MPG) in due course).  

Provisionally, the date on which JIBAR will cease to be reported/provided is the 31/12/2026. Any contracts still active and referencing JIBAR at this point would need to move over to a ZARONIA-linked equivalent at the next coupon reset date as indicated in the relevant security reference documentation - essentially when the next JIBAR reset rate is determined. 

What does this mean for JIBAR-linked securities and the market? 

As stated above, any JIBAR-linked securities still active and held after 01/01/2027 will need to be transitioned to an economically equivalent asset with a ZARONIA reference rate, accordingly.  

The SARB MPG expects the market to start transitioning well ahead of this date, to avoid market turbulence/disruption with large volume of securities being transitioned in a short space of time.

This will require a market-wide collaboration across Banks, Buy-Side Asset Managers, Administrators, and Market Facilitators (such as the JSE/STRATE, CSDPs etc.). We currently await SARB MPG communication on this. 

How will repurchases be traded – will these be linked to JIBAR or ZARONIA?

Any security that is referenced to JIBAR will either need to be exited or transitioned to an alternative reference rate such as ZARONIA to continue to accrue interest at a provided rate.  

In addition, new curves will need to be utilised to value these positions. At transition from JIBAR to ZARONIA, a Credit Adjustment Spread (CAS) will need to be added to the ZARONIA rate to equate for any economic difference between the two. The CAS will be calculated using historical data and will be set – provisionally - at the end of 2025, for use in any transition calculations where needed. Currently, Bloomberg has been appointed as the calculation agent for the SARB in determining the CAS spread to be applied.  

We want to reiterate that there will be minimal performance impact on Futuregrowth client portfolios during the transitions. Repurchase trades are not linked to JIBAR. The rate used in the repurchase trade is a fixed rate for the term of the repurchase agreement and is negotiated on a trade-by-trade basis. These will proceed as they are currently done. 

Will there be a sudden change in yield or impact on the Money Market Fund?  

We do not anticipate a sudden or material change in yield for money market funds as a result of the transition from JIBAR to ZARONIA or the trading of new ZARONIA linked securities. The issuance of new ZARONIA linked securities typically shows a higher spread compared to similar JIBAR linked securities. This is to affect an equivalent all in yield between similar issuances. Similarly, for transitioning instruments the Credit Adjustment Spread (CAS) should offset the impact of ZARONIA being a lower rate than JIBAR.  

However, it is worth noting that the CAS is intended as a temporary bridge to facilitate the transition of JIBAR-linked securities to ZARONIA-linked securities – not as a permanent feature. Over time, as market liquidity develops and credit spreads evolve due to demand and supply dynamics in the ZARONIA market, yields may gradually adjust. Futuregrowth continues to monitor these dynamics closely and will provide further updates as market clarity improves. 

What will derivatives reference and what is the impact of this? 

These would also need to adapt to ZARONIA. Currently, there are no active listed ZARONIA futures, but these contracts will need to transition to ZARONIA as JIBAR is phased out. There are active ZARONIA OTC derivatives, such as ZARONIA Overnight Index Swaps (OIS).  All OTC derivatives linked to JIBAR will also be transitioned to equivalent ZARONIA linked instruments. 

Are Futuregrowth’s systems configured to trade in ZARONIA rates? 

Yes, they are.  It should be noted that the determination of the ZARONIA rate is different from that of JIBAR. JIBAR is a forward-looking term rate, whereas ZARONIA is an overnight rate and is backward looking to the previous working day. ZARONIA is based on actual traded market rates and will also be a daily compounded rate between coupon payment dates.  

Systems will need to be configured, where appropriate, to accommodate these differences, especially if the systems utilised also determine interest accruals and valuations.  

If ZARONIA is already published why do contracts still refer to JIBAR - and does this matter?  

As covered above, JIBAR will still be available until the dates provisionally mentioned and there will be a period where both JIBAR and ZARONIA-linked securities will co-exist.

This will end when JIBAR cessation becomes effective and JIBAR-linked securities have to be transitioned to ZARONIA.  Adoption is driven by market liquidity and it is expected that when the “No New JIBAR” date is officially announced we should see a marked increase in the adoption and issue of ZARONIA-linked securities.